Rock v. Rathsburg Associates, Inc.

Background

Kim Bradley Rock sued Rathsburg Associates, Inc. after Rathsburg terminated his employment on May 6, 2021. Rock alleged one claim for breach of contract, one claim for unpaid wages under Minnesota Statute section 181.13, one claim for unlawful retaliation under Minnesota Statute section 181.932, and one claim for unjust enrichment.

Rock worked as a Sales Engineer in territories that included Minnesota, North Dakota, South Dakota, and Wisconsin. He alleged that his work focused almost exclusively on Minnesota, that 80% to 90% of his sales were based there, and that he regularly visited Minnesota customers. His compensation plan provided that he would be paid commissions one month after Rathsburg received revenue from a sale, but it also stated that commission payments ended when employment ended.

Rock alleged that Rathsburg delayed or failed to claim and pay commissions and that he was terminated after raising concerns about delayed payments. He alleged that contracts connected to his work had generated, or would generate, approximately $400,000 in commissions for Rathsburg on approximately $8 million in sales, and that he would be entitled to approximately $160,000.

Motion to Transfer

Rathsburg sought to transfer the case to the Eastern District of Michigan, where it resides, or the Western District of Wisconsin, where Rock resides. The court explained that transfer requires the moving party to show that the relevant factors strongly favor another district.

The court denied the motion to transfer. It found that neither proposed district was more convenient overall. Minnesota was the center of much of Rock’s work, including his regular customer visits and contacts with hundreds of Minnesota companies. The court also found that transfer would likely shift the burden from Rathsburg to Rock rather than make the case more convenient. Minnesota’s interest in deciding claims based on Minnesota law also weighed against transfer.

Motion to Dismiss

The court applied the Rule 12(b)(6) standard, under which a complaint survives if its factual allegations make liability reasonably plausible, rather than merely possible.

For the breach-of-contract claim, the court assumed for purposes of the motion that the offer letter and Variable Compensation Plan formed a contract. The court found that Rock plausibly alleged that Rathsburg had received revenue from sales connected to his work. The court also stated that the plan’s provision ending commission payments when employment ended might conflict with Minnesota law and might be unenforceable, although it did not decide that issue. The court therefore denied dismissal of the contract claim.

For the unpaid-wage and retaliation claims, the court concluded that Rock plausibly alleged that Rathsburg was an employer under the Minnesota statutes. The statutes define an employee based on performing services for hire in Minnesota, not on residency. Rock’s alleged Minnesota sales territory, customer contacts, regular visits, and Minnesota-based commissions were sufficient at the pleading stage. The court also found that Rock plausibly alleged that commissions had already been earned but remained unpaid when he was terminated. The court denied dismissal of both statutory claims.

For unjust enrichment, the court held that the claim could be pleaded in the alternative to the breach-of-contract claim. Rock had represented that he was pleading unjust enrichment as an alternative theory, so the court denied dismissal of that claim.

Order

Judge John R. Tunheim ordered that Rathsburg’s Motion to Transfer was DENIED and Rathsburg’s Motion to Dismiss was DENIED.